Canada: Retail sales jump in January but should fall in February

Retail sales rose 1.4% in January, more than double the pace anticipated by Statistics Canada and the consensus of forecasters. The advance in the month was entirely due to higher volumes, up 1.5%.

At the same time, core retail sales – purchases excluding gasoline stations and fuel vendors and motor vehicle and parts dealers – rose a still-respectable 0.5% in the first month of 2023.

Statistics Canada’s advance estimate of retail sales is pointing to a decline of 0.6% in February 2023. This would be the weakest print since last July.

January retails sales signaled that 2023 started on a high note for Canadian consumers. This reinforces our estimates for a decent consumption-driven advance in Q1 2023 real GDP of 1.5% annualized or better.

But Statistics Canada’s flash estimate for February suggests the good times may not last.

Along with the lower-than-expected inflation print for February, a slowing in consumer activity would no doubt be music to Tiff Macklem’s ears, as it means everything is going according to plan.